‘O Presidente’ in his ‘state of the union’ vanity show address yesterday unveiled among other things the European Commission’s proposal for a ‘Tobin Tax‘ or officially a Financial Transactions Tax (FTT). It would fall on monetary and financial institutions (MFIs), banks to ordinary people. It would apply to inter-MFI transactions within the EU and between EU MFIs and third country MFIs. In the commission’s own words,

The financial sector was a major cause of the crisis and received substantial government support over the past few years. To ensure that the sector makes a fair contribution to public finances and for the benefit of citizens, enterprises and Member States, the European Commission on 28 September put forward a proposal for a financial transaction tax (FTT).

So:

Through the FTT, the financial sector will properly participate in the cost of re-building Europe’s economies and bolstering public finances. The proposed tax will generate significant revenues and help to ensure greater stability of financial markets, without posing undue risk to EU competitiveness.

From the outside looking in on the latest phase of the GFC (no it never ended) unfold the brain oscillates between utter disbelief and (when that is successfully suspended) mad hilarity – and then one realises it is actually all for real. One such transitional moment was the announcement by Tesco last week that it had decided to throw stg£5oom at (staple) grocery price cuts. Clearly Britain’s biggest bruiser in the grocery business had decided that its home market is in deep recession and home-makers’ budgets are seriously squeezed. It has said as much: reported consumerist web site bitterwallet,

Tesco top knob Richard Brasher said: “Across the country families are telling us the same thing: their budgets are under real pressure. They want more help today to afford everyday essentials. We have listened carefully and, for families facing hard times, the Big Price Drop will cut prices on the products they need to buy the most.

Another obviously, more recently, was the Rastani Moment (or RM as I’ve taken to call it). This truly was transformational – all the way from disbelief to hilarity and awakening reality. Watch it here (or if you’ve already seen it just pull the duvet over your head). Read the rest of this entry »

No posting last weekend – internet problems and also simply the chaos, even through the weekend itself as everyone hosed the Greeks and eurozone finance ministers, led by the Austrian minister, got uppity with US Treasury Secretary Tim Geithner for suggesting they better get their act together. Briefly to recap though: the working week was bookended by the UK’s Independent Commission on Banking (ICB) or Vickers commission recommending separation of utility and investment banking in Britain and ended with a stunning example of the point of the Vickers proposals. As ICB member (and FT economics editor) Martin Wolf wrote in the FT Friday, 16 September, ‘Thank you UBS’.

As a member of the UK’s Independent Commission on Banking under Sir John Vickers I could not have asked for a better illustration of the unregulatable risks to which investment banks are exposed than Thursday’s announcement of a loss of $2bn in “unauthorised trading”. No sane country can allow taxpayers to stand behind such risks.

British bankers and their lobbyists had spent months following the publication of the Vickers group’s interim report – which presented the ring-fencing proposal in draft – pushing that hoary line that it would signal the death of the City, the end of all life inside the Square Mile – and prime minister Cameron and chancellor George Osborne seemed to be buying the argument. And then! Step forward Kweku Adoboli – and ring up $2bn plus on the UBS till.

But before that unveiling Thursday (15th) by UBS management of their little loss (clients’ funds were not affected) JPM’s Jamie Dimon stuck in his five cents-worth Monday (in an FT interview) on the evils of bank regulation: Basel III was ‘anti-American’?! And he was ‘almost’ inclined to the view that the US should fold up the tent and …

“I’m very close to thinking the United States shouldn’t be in Basel any more. I would not have agreed to rules that are blatantly anti-American,” he said. “Our regulators should go there and say: ‘If it’s not in the interests of the United States, we’re not doing it’.”

Actually it is all getting very (worryingly) xenophobic – including again this week. Everyone has their own version of the ‘Polish’ joke. The English have their ‘Paddy’ stories, the Irish have their ‘Kerry man’ tales. Kiwis and Wallabies sledge each other on and off the cricket (and rugby) field of play and so on and on. All very fine and in the nature of things but … It can get out of hand. Yes, the Greeks have problems and have brought things on their own heads but the idea that they are all beach bums, slackers and layabouts is sailing pretty close to outright racism, and no small touch of sectarianism as well, when mouthed by northern European politicians who themselves can have questions to answer. Don’t mention the Anschluss! Read the rest of this entry »

It is now clear what the Schlieffen Merkel game-plan is – and that she has Sarkozy under her thumb in pursuing it. It is to support Greece to the hilt in the present shambles. The Greeks will get their €8bn – and soon. There will be no more quibbles or threats from the troika or any of its components and nor will there be, to the best of her ability, any more rude noises from her ministers. The next tranche will be handed over despite the fact that Greece is not currently meeting – and will not and cannot meet – the targets laid down in the memorandum of understanding and work-out plan agreed with the troika. If there is any doubting that the French have been brought to heel by Merkel, then simply look at the utterances of French government spokeswoman and budget minister Valerie Pecresse Sunday 11 September, that France would stop lending to Greece if it did not deliver on its part of the bailout program. Read the rest of this entry »

What a week – and what an end to it: the end of Jurgen Stark, at elast at the ECB, as chief economist and executive board member, with three years still to run in his term. Earlier in the week Deutsche’s Josef Ackermann summed it up on the state of European financial markets, “The ‘new normal’ is characterized by volatility and uncertainty — not only in respect to market developments, but also in consideration of the future of the financial branch”, indeed we live in new normal times – as if we needed any more proof actually.

Friday afternoon ZH reported the market chatter was of Greek default over the weekend. Things do look desperate for the Hellenes: from DJ Greek service, [A]fter the interruption of negotiations with the Troika last week, the postponement of disbursement of next €8 billion tranche is possible. Government officials note that available funds are sufficient to meet basic needs until the end of the month.

However weekending events – actual and prospective –should not be allowed to swamp our attentions from earlier developments – whether Ackerman’s from the hip or Trichet’s top-blower, not forgetting Obama’s plan and lots more. Read the rest of this entry »